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IN THE HIGH COURT OF JUDICATURE AT PATNA
K. VINOD CHANDRAN, CJ. and PARTHA SARTHY, J.
CWJC No.9716 of 2024
(6.8.2024)
Infrastructure Development Authority ... Petitioner
vs.
Assistant Commissioner of Income Tax, TDS Circle, Patna. ... Respondent
Income Tax Act, 1961 – Section 197 – Deduction of TDS at lower rate – Provision under Section 197 only clothes the Assessing Officer with the power to satisfy himself that the total income of the recipient justifies the deduction of Income Tax at any lower rates or at a NIL rate – Hence, a demand pending against the assessee would not clothe the Assessing Officer with the power to summarily reject an application under Section 197 – The satisfaction to be recorded under Section 197 is clearly with respect to the total income of the recipient for the subject assessment year, where the deduction is claimed at a NIL rate for the interest income earned from the fixed deposits in banks. (Para 4)
K. Vinod Chandran, CJ.—The writ petition is filed against Annexures-P/1 and P/2 orders, which resulted in rejection of applications filed under Section 197 of the Income Tax Act, 1961. The orders are dated 14.05.2023 and 30.01.2024 respectively and relate to the same issue.
2. The petitioner had sought for deduction of TDS in the interest income earned from banks at NIL, since the petitioner’s contention was that the total income justifies such benefit under Section 197. The orders impugned only found that there was a tax demand with respect to the Assessment Year 2018-19, which is pending and hence the deduction at the lower rate/NIL rate is not possible.
3. Learned Senior Counsel appearing for the petitioner would contend that the tax demand for the year 2018-19 has been stayed by the Principal Commissioner of Income Tax till the First Appeal is disposed of.
4. De hors the stay ordered; pending First Appeal, we see that the provision under Section 197 only clothes the Assessing Officer with the power to satisfy himself that the total income of the recipient justifies the deduction of Income Tax at any lower rates or at a NIL rate. Hence, a demand pending against the assessee would not clothe the Assessing Officer with the power to summarily reject an application under Section 197. The satisfaction to be recorded under Section 197 is clearly with respect to the total income of the recipient for the subject assessment year, where the deduction is claimed at a NIL rate for the interest income earned from the fixed deposits in banks.
5. We set aside Annexures P/1 and P/2 orders for having decided the issue on extraneous considerations. The application will stand restored before the Assessing Officer and the same will be considered in accordance with law, as interpreted by us hereinabove.
6. The writ petition stands disposed of.
The court emphasized the importance of following the rules and standards set by the government, and held that the Assessing Officer cannot ignore the mandate of Rule 28AA.
The absence of a reasoned order in tax assessment undermines its validity, requiring adherence to procedural rules for fair evaluation.
The appellant was justified in not deducting TDS based on valid declarations from senior citizens under the Income Tax Act provisions.
Procedural adherence under Section 197 of the Income Tax Act is critical; non-compliance necessitates quashing of orders and remand for proper evaluation.
The court emphasized the importance of following the prescribed procedure and providing reasons in the order, as required by the Income Tax Act and IT Rules.
Point of Law : If any refund is due and payable to the Petitioner, the same shall be refunded not later than eight weeks from today, in accordance with law.
TDS cannot be deducted from interest payable under a decree since the decree must be executed as it stands without statutory deductions where the decree itself does not provide for any.
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